Are you still waiting for your 2020 Individual Tax Refund? You may have to get in line. The IRSs’ backlog of unprocessed individual and business tax returns has grown to more than 35MM, notes a report from the national taxpayer advocate published this week and shared by the Washington Post. This represents an increase from the 31MM unprocessed returns reported in May of this year.

These 35MM returns are awaiting manual review by the IRS, meaning taxpayers will not get their refunds until the IRS can manually process those returns awaiting review.

The backlog originated when the pandemic caused the IRS to shut down some of its operations in the spring of 2020, during the middle of tax season for 2019 returns. Paper-filed returns and correspondence mailed to the IRS were stored in trailers waiting months for IRS employees to access them; which in part explains why many 2019 returns are still not processed, and much tax notice correspondence has also not been processed.  

At SJG, we’re finding:

• 1.      Delay in processing of 2020 individual tax returns due to refunds that include Recovery Rebate Credits not received or inaccurately report amounts received.
  
• Filers were allowed to include calculations for stimulus amounts on 2020 individual income tax returns. We’re finding that many filers claiming these credits have still not received their refunds, often waiting four months or more for their returns to be processed and refunds to be received.
• 2.      Amended tax returns are taking several additional months to process as many of these returns had to be paper filed.
• 3.      Returns claiming Net Operating Loss Carrybacks are taking 9-12 months or more to process.
• 4.      Taxpayers with International Tax Matters are unable to get any assistance whatsoever as the IRS does not appear to have this department operational. Correspondence appears to have landed in some black hole with no estimated time of resolution.

Unfortunately, there is no promise of significant improvement on the horizon until the IRS is fully operational, currently estimated to be at only 50% capacity.

If you have a material tax matter that requires resolution, we at SJG can assist you; however, patience is currently the best course of action if you face one of the above scenarios.